TEXAS billionaire financier Allen Stanford has been charged with fraud and obstruction of justice in connection with an alleged $7 billion Ponzi scheme. Mr Stanford (59) surrendered himself to the FBI on Thursday night after a warrant was issued for his arrest.
Leroy King, a former Antiguan regulatory official, was also charged with fraud and obstruction, along with three of Mr Stanford’s former employees.
Last February, the Securities and Exchange Commission (SEC) closed the Texan’s financial operations, accusing him of running a “massive Ponzi scheme”.
The alleged fraud involved billions of dollars of certificates of deposit issued by Stanford International Bank on the Caribbean island of Antigua. The instruments, which paid high returns, were marketed around the world, particularly in the United States and Latin America.
The SEC said yesterday that investigators had built “an impressive criminal case from the rubble of this massive fraud”. The SEC’s civil lawsuit is separate from a criminal indictment that could leave Mr Stanford facing up to 250 years in prison.
The indictment accuses Mr Stanford and six conspirators of accepting money from investors under false pretences and of milking his Antigua-based bank for personal gain. It alleges that Mr Stanford bribed Mr King, the former regulator, to turn a blind eye to his activities.
Antigua said it would consider any request for the extradition of Mr King, who has been on leave from his post as the island’s top banking regulation body since March, adding that its government was doing an independent investigation of the official.
Robert Khuzami, director of the SEC’s division of enforcement, said Mr Stanford’s alleged bribery of Mr King added to the nefarious nature of his conduct.
“Instead of buying the safe and sound investments he promised his clients, Stanford bought Antigua’s top securities cop,” he said.
“While Stanford quarterbacked his massive Ponzi scheme, he paid the referee to spy on the huddles and provide an insider’s play-by-play of the SEC’s investigation.”
A colourful figure who funded the Twenty20 international cricket tournaments, Mr Stanford has repeatedly protested his innocence, accusing the US government of using “Gestapo tactics”.
A citizen of both the US and Antigua, he uses the title “Sir Allen” because he was awarded a knighthood by Antigua without the knowledge or approval of Britain’s Queen Elizabeth.
Mr Stanford was arrested late on Thursday outside his girlfriend’s home in Fredericksburg, Virginia as FBI officers sat in a row of cars.
“I told him to walk out and introduce himself,” his lawyer, Dick DeGuerin, said. “So he did, and he asked them ‘if you’ve got a warrant, take me into custody. If you don’t, Im going to Houston.’ And they did, so they arrested him.”
The SEC also accused Gilberto Lopez and Mark Kuhrt, accountants for Stanford-affiliated companies, of fabricating the financial statements of Stanford International Bank, which is at the centre of the alleged fraud.
Mr Kuhrt and Mr Lopez helped to fabricate SIB’s financial statements to give investors the “false illusion” their investments were solid, safe and secure, the SEC complaint alleged. They used a predetermined return on investment number to “reverse-engineer” the statements and report investment income that the bank did not actually earn.
To hide the fabrication, Mr Lopez and Mr Kuhrt, along with Mr Davis, allegedly transferred all SIB-related information to thumb drives then deleted from servers located in the US, kept back-up files on a portable hard drive referred to as “the football” and regularly burned files.
